A Small Tax Change Is a Boon for Permanent Life Insurance
January 13, 2021 by Leslie Scism
Federal lawmakers’ big year-end spending package includes a little-noticed revision of the tax code that is likely to boost sales of life insurance, particularly for wealthy Americans.
The law lowers a minimum interest rate used to determine whether combination savings and death-benefit policies known as permanent life insurance are too much like investments to qualify for tax advantages granted to insurance. The interest-rate floor was put in place in 1984 to weed out policies that were mostly investment vehicles with a thin layer of insurance. Lowering the rate allows owners to put more in the savings portion.